Feed Editor19 Jul 2014 18:08:47 GMTMohammed Amin - Islamic financeWritings on Islamic finance by Mohammed Amin, an internationally recognised expert on the tax, regulatory and accounting aspects of Islamic finance.https://www.mohammedamin.com/
mohammed.amin@mohammedamin.com (Mohammed Amin)1440enmohammed.amin@mohammedamin.com (Mohammed Amin)https://www.mohammedamin.com/Images/Mandelbrot_set_for_logo.jpghttps://www.mohammedamin.com/
Mohammed Amin's logo is the Mandelbrot set.Mohammed Amin - Islamic financeThe regulatory capital position of CIMB Bank and CIMB IslamicA previous page identified that, contrary to expectations, CIMB Islamic was more profitable than its larger conventional parent, CIMB Bank. I have looked further at the published financial information. For some unexplained reason, CIMB Islamic appears to have lower overheads. CIMB Bank's assets are also riskier, and therefore require it to hold more regulatory capital. However CIMB Bank appears not to earn a higher return on those riskier assets. That depresses its return on equity.10 Sep 2019 14:50:15 GMThttps://www.mohammedamin.com/Islamic_finance/CIMB-regulatory-capital.html
Mohammed Amin0123E061-AFAF-480E-A2BC-492D6551836FTwo banks, one Islamic and one conventional, which are directly comparableAs they are part of the same group, I expect CIMB Bank (which is conventional) and CIMB Islamic to have similar cultures and operational efficiency. As CIMB Bank is larger, I expected it to be more profitable. The 2018 accounts showed the opposite. I investigated some possible reasons.14 Aug 2019 20:18:00 GMThttps://www.mohammedamin.com/Islamic_finance/CIMB-conventional-Islamic-comparison.html
Mohammed Amin933F560A-8A61-44F3-9074-204D96D23840The terrible financial history of European Islamic Investment Bank plc, now called Rasmala plcI looked at the financial accounts for 13 years of this company. They show that it has lost significant amounts of money most of the time, with occasional profits. It has been a disastrous investment for its shareholders.13 Jul 2019 16:35:02 GMThttps://www.mohammedamin.com/Islamic_finance/EIIB-sorry-saga.html
Mohammed Amin606A6EED-4B20-4B54-8D48-58E19CC1738BCan you pay interest between companies with 100% common ownership?A reader asked this question. In my view, a transaction between two wholly owned companies is a nullity for religious purposes, so no religious prohibitions can apply.7 Jul 2019 14:28:11 GMThttps://www.mohammedamin.com/Islamic_finance/Paying-interest-to-yourself.html
Mohammed AminFD5985E5-25E8-4AF4-9BEE-1B9D531F2E33Islamic finance faces many regulatory barriers, not just tax obstaclesFinancial services regulations generally pre-date Islamic finance. As a consequence, unless the regulatory provisions are adapted, they often preclude Islamic finance transactions. I give three examples, one from Russia and two from the UK.19 May 2019 00:57:33 GMThttps://www.mohammedamin.com/Islamic_finance/Regulatory-barriers-to-Islamic-finance.html
Mohammed Amin26E58DB1-1136-464D-981A-99CE428ABA3FWhat does the prohibition of preference shares in Islamic finance teach us?One of my website readers recently asked whether preference shares were permitted in Islamic finance. I explained that almost all Shariah scholars who set down the rules for what is allowed in Islamic finance prohibit them. However the legal reasoning behind the prohibition relies upon analogies with very old Islamic partnerships law and is not well thought out in my opinion.8 May 2019 23:56:44 GMThttps://www.mohammedamin.com/Islamic_finance/Preference-shares-prohibited-why.html
Mohammed AminEB4F9EAA-FEBE-4DA2-BE9F-C30D6999B60FUK bank levy and the nature of Islamic banks' liabilitiesA reader asked me whether the UK's bank levy might discriminate against Islamic banks. The drafter of the UK's bank levy legislation wrote it to ensure that Islamic banks were included. The reader's question led me to address the accounting for profit sharing investment accounts. My view is that, as operated in practice, profit sharing investment accounts are clearly liabilities for accounting purposes.4 Apr 2019 20:25:33 GMThttps://www.mohammedamin.com/Islamic_finance/Bank-levy-nature-liabilities.html
Mohammed Amin64D32544-1672-4723-876C-FC682B680AC8A financial history of Islamic Bank of Britain plc, now called Al Rayan Bank plcThis is the UK's first retail Islamic bank. I summarised all of its published accounts. They show steady losses year by year, until the bank was taken over and recapitalised after which it has made reasonable profits. It was previously just too small to be viable.4 Mar 2019 21:02:11 GMThttps://www.mohammedamin.com/Islamic_finance/IBB-financial-history.html
Mohammed AminEA64D87A-4984-43FE-A92D-A0EAFA06B2E1Small profits mixed with big losses - the record of the UK's largest Islamic investment bankPeople underestimate how much you can learn about a company just by reading its published accounts. I downloaded and summarised the accounts of Bank of London and the Middle East plc. They show a pattern of small losses in good years, interspersed with very big losses in bad years. I consider this shows how hard it is to make money in Islamic finance in the UK.1 Mar 2019 21:29:11 GMThttps://www.mohammedamin.com/Islamic_finance/BLME-accounts-history-Jan-2019.html
Mohammed AminB69719BE-0D4C-4FF3-B75A-5268456CB77DWhy private sector Shariah compliant student finance would not work in the UKThe Government's promised Shariah compliant student finance is long delayed, but I expect it to be launched eventually. A reader asked whether the private sector could instead offer a pure equity based scheme that would be more desirable from a Shariah perspective. In my view "adverse selection" would cause the private sector financiers excessive losses.17 Dec 2018 20:40:42 GMThttps://www.mohammedamin.com/Islamic_finance/Private-sector-Shariah-compliant-student-finance-UK.html
Mohammed Amin2FE75C7D-20C9-4F44-A1B4-80F9CCB7C84CChanging the UK tax system for Islamic finance is challengingIt is nearly two decades since the UK started modifying its tax law so that Islamic finance transactions should not be taxed more heavily than conventional finance transactions. However a "level playing field" has not yet been achieved. One key reason change is so slow is because the tax system is extremely complex. Accordingly, every change risks creating fresh anomalies.15 Dec 2018 20:55:40 GMThttps://www.mohammedamin.com/Islamic_finance/Changing-UK-tax-system-challenging.html
Mohammed Amin2CA14D59-A92D-4718-A67C-803F16DCAE60Islamic finance requires accurate vocabularyFor many years I have been unhappy with the name (in English) many Islamic finance practitioners give to the payment made by a customer under a takaful (Islamic insurance) contract. It is often described as a "donation" when it is nothing of the sort. Such terminology risks misleading people who are new to Islamic finance regarding the true economics of the transaction. My September 2018 Islamic Finance News column suggested more accurate names for the payment.12 Nov 2018 22:00:33 GMThttps://www.mohammedamin.com/Islamic_finance/Accurate-vocabulary-required-in-Islamic-finance.html
Mohammed AminBD858A56-ACD0-4F3B-951C-30712A4038CDA second look at the performance of Shariah compliant share indicesMy June 2018 Islamic Finance News column looked at the relative performance of the conventional and Shariah compliant versions of the FTSE All World Index from 2008-2017. A reader responded by saying that the MSCI World Index showed the opposite result. I have taken a detailed look at the figures which not change my fundamental point. A conventional equity investor should perform better than a Shariah compliant investor, simply because the the conventional investor can pick from the entire universe of shares, while the Shariah compliant investor cannot.25 Aug 2018 15:12:16 GMThttps://www.mohammedamin.com/Islamic_finance/Second-look-Shariah-compliant-share-indices.html
Mohammed Amin2CD08074-1F19-4790-A70C-BE92092E6DEFThe UK tax treatment of Islamic finance "borrowing" costsIslamic banks do not make loans, but provide finance in other ways. UK tax law gives the finance costs paid by Islamic banks' customers the same tax treatment as it gives interest expense. That is normally helpful, but not always. For example, it means that the rent paid in a diminishing musharaka transaction to finance "buy to let" property will receive only basic rate income tax relief.22 Jul 2018 18:49:53 GMThttps://www.mohammedamin.com/Islamic_finance/UK-treatment-IF-borrowing-costs.html
Mohammed AminB0AC1AFB-664E-40E1-954B-A7E57F488B0CDo Shariah compliant shares perform better?Writers and speakers about Islamic finance often contend that not only is it more moral, it also produces better financial results. During the global financial crisis, they regularly pointed to the superior performance of Shariah share indices. However, the evidence shows that in general Shariah compliant share indices perform worse than their conventional counterparts. That is what logic would predict.19 Jul 2018 11:09:00 GMThttps://www.mohammedamin.com/Islamic_finance/Do-Shariah-compliant-shares-perform-better.html
Mohammed AminE271C83A-895A-4CE0-9EDE-C6DFC02C26F7UK taxation needs to accommodate Shariah compliant real estate refinancingThe UK is slowly amending its tax laws to facilitate Islamic finance. However the tax treatment of Shariah compliant real estate refinancing is a particular problem. Conventional refinancing of appreciated real estate involves no tax costs. Meanwhile, Shariah compliant refinancing causes the accrued capital gain to become taxable.19 May 2018 18:15:56 GMThttps://www.mohammedamin.com/Islamic_finance/Real-estate-refinancing.html
Mohammed Amin624D5353-5A1D-4259-B2EA-C72307472D56The UK's first Islamic bank sukuk issueConventional banks securitise mortgages to free up their regulatory capital. Investors in conventional mortgage backed securities receive a pre-specified return provided that the mortgages do not default beyond a safety margin built into the terms of the securities. Al Rayan Bank similarly issued sukuk in order to free up its regulatory capital. The sukuk investors will receive a return equal to LIBOR + 0.8% provided the mortgages do not default beyond the safety margin. From an economic perspective, there is no difference between conventional mortgage backed securities and this sukuk.30 Apr 2018 16:23:04 GMThttps://www.mohammedamin.com/Islamic_finance/First-UK-Islamic-bank-sukuk-issue.html
Mohammed Amin4D575C4A-FBBE-4973-A2B8-25E94C0FE459Many Islamic scholars don't understand that corporations are not partnershipsTraditional Islamic law (fiqh) includes a detailed partnership law, covering several types of partnerships. However it never developed the concept of a corporation. Today many Islamic scholars attempt to analyse corporations using only the partnership categories in traditional Islamic law. This is a serious mistake, and holds back the development of Islamic law, and in my view holds back Muslim majority societies more generally.1 Apr 2018 20:06:40 GMThttps://www.mohammedamin.com/Islamic_finance/Corporations-are-not-partnerships.html
Mohammed Amin87572F54-BABF-4C85-9D4C-74427BEB41E2A transaction apparently complying with Islamic finance rules which dismays most Muslims who look at itThis page discusses a "total return swap" structure which has been signed off as Shariah compliant. The structure would allow Muslims to achieve the same economic returns as investing in any identified asset. For example, a Muslim could achieve the economic results of investing in brewery shares, while remaining Shariah compliant. The structure risks violating any purposive intent of Islamic finance. That may account for the nickname of the underlying religious opinion as "The Doomsday Fatwa."19 Feb 2018 21:59:38 GMThttps://www.mohammedamin.com/Islamic_finance/Doomsday-fatwa-IF-purpose.html
Mohammed Amin9CA8A5CC-8FD0-4E6B-A0E9-38998EA68BA1An example of the risk to international investors from local country legal regimesA key requirement for a successful economy is reliable, relatively inexpensive, and rapid, enforcement of commercial contracts. Sadly the courts of many countries cannot be relied upon when it comes to enforcing contracts, particularly when foreigners are seeking to enforce contracts against local country residents. The case of Dana Gas and its sukuk default illustrates this very well.16 Feb 2018 21:06:15 GMThttps://www.mohammedamin.com/Islamic_finance/Local-country-legal-regimes-risk.html
Mohammed Amin03C6CA50-2A54-4A52-A52A-47566055E3DBLeverage attributes in Islamic banking are the same as in conventional bankingIslamic banks fulfil the same economic functions as do conventional banks. Furthermore, the services they provide to their customers, whether "depositors" of money or "borrowers" of money, are essentially the same. Accordingly it should be no surprise that both types of bank derive competitive strength from the same leverage attributes.15 Feb 2018 21:53:09 GMThttps://www.mohammedamin.com/Islamic_finance/Leverage-attributes-Islamic-banking.html
Mohammed AminA45AEB45-6DCD-4068-8530-FB9596C7407BFor Islamic banks, Shariah compliance is a foundation attributeAbout 25 years ago, Price Waterhouse's (now PricewaterhouseCoopers or PwC) global strategy was heavily focused on the distinction between "foundation attributes" and "leverage attributes". A foundation attribute is one you must have to play in the game; a leverage attribute is something that gives you competitive advantage. Because Shariah compliance is essential for all Islamic banks, it does not distinguish one Islamic bank from another. Hence it is a foundation attribute.14 Feb 2018 20:10:51 GMThttps://www.mohammedamin.com/Islamic_finance/Foundation-attribute-Shariah-compliance.html
Mohammed AminE386403E-263C-4828-89D1-0BFA1F4244C6The difference Islamic finance makesIslamic finance has basically the same economics as conventional finance. This naturally leads to the question of whether Islamic finance makes any difference to the world. I see its key benefit as bringing people into the financial system who would not use conventional finance for religious reasons. Islamic finance should also discourage borrowing to accelerate consumption.13 Feb 2018 19:25:44 GMThttps://www.mohammedamin.com/Islamic_finance/Difference-Islamic-finance-makes.html
Mohammed Amin16E14D09-6935-4C69-A3C1-A74C30DC0D12Is there a meaningful choice between AAOIFI and IFRS accounting standards?My correspondence with a journalist on the apparent choice between AAOIFI and IFRS accounting standards. In most cases, financial institutions cannot choose which standards to use; their regulator prescribes the accounting standards to apply. Quite separately, users of accounts need to remember that AAOIFI and IFRS standards have different goals. The page also includes my subsequent Islamic Finance News article, and links to some other resources on my website.11 Feb 2018 17:23:33 GMThttps://www.mohammedamin.com/Islamic_finance/AAOIFI-IFRS-standards-meaningful-choice.html
Mohammed Amin24EABB26-B307-43F2-867C-3CF742D6A964Islamic and conventional banks face almost identical transfer pricing issuesIslamic banks are banks which operate in accordance with rules set by Shariah scholars. As both conventional and Islamic banks fulfil the same economic functions, they face similar transfer pricing issues. I gave some technical responses to a researcher and based this page on them. The page starts with a basic explanation of what transfer pricing is.20 Dec 2017 19:55:11 GMThttps://www.mohammedamin.com/Islamic_finance/Transfer-pricing-Islamic-banks.html
Mohammed AminDBA8ECAC-8788-4B4F-874A-8748B06B52CELate assertions of Shariah non-compliance damage Islamic financeIslamic finance arrangements need to be Shariah compliant throughout their life. Unfortunately some borrowers initially accept their arrangements are Shariah compliant, but assert non-compliance when repayment is due. Several such cases have resulted in litigation. Late assertions of Shariah non-compliance create extra risk in Islamic finance, thereby making it more expensive. They also damage Islamic finance's reputation. Contractual uncertainty in Islamic finance must be minimised.16 Dec 2017 19:57:19 GMThttps://www.mohammedamin.com/Islamic_finance/Late-assertions-of-Shariah-non-compliance.html
Mohammed Amin274378AB-A083-48DE-8316-45E5059BCEE6Lecture: Islamic finance - why, how, and the problems under UK tax lawMy recorded 55 minute PowerPoint presentation explains how the UK has modified its tax law to facilitate Islamic finance. It also mentions the problems that still remain.10 Jul 2017 16:17:11 GMThttps://www.mohammedamin.com/Islamic_finance/CIOT-Harrow-Lecture-4-May-2017-.html
Mohammed AminA0B5E485-4C82-4565-9B35-767E0B9A52C0Why Islamic finance is insufficiently innovative"Fintech" looks like disrupting conventional finance. A reader asked why this is not happening in Islamic finance. One reason is the much smaller size of Islamic finance. Conventional finance offers much bigger rewards to successful innovators. I believe another important reason is religious conservatism in Islamic finance, with innovative concepts having to be justified within narrow historical modes of legal analysis.24 Jun 2017 00:59:25 GMThttps://www.mohammedamin.com/Islamic_finance/Innovation-deficit-in-IF.html
Mohammed AminC694D546-06C0-43CE-9657-A7F915C2E045Bank of England almost ready to take Shariah compliant depositsBanking regulations require banks to maintain large amounts of high quality, preferably risk free, assets which can be accessed almost immediately. Conventional banks maintain deposits with the central bank, which in the UK is the Bank of England. Islamic banks cannot do so, as such deposits are not Shariah compliant. The Bank of England is consulting about it offering a Shariah compliant deposit facility, and in my view it is nearly there.19 May 2017 16:19:28 GMThttps://www.mohammedamin.com/Islamic_finance/BoE-Shariah-compliant-deposits-second-consultation.html
Mohammed Amin526DF2CC-A1DE-455F-A6DD-6173D5B2E7D9UK slowly progressing towards providing Shariah compliant student financeDiscussions have been held with the Government since 2011 regarding the possible introduction of Shariah compliant student finance. Progress has been made steadily over the years, albeit very slowly. The Government now has the statutory power to offer such finance. However the Government has not set any deadline for the introduction of the scheme. I remain hopeful that it will happen by September 2018.7 May 2017 21:52:46 GMThttps://www.mohammedamin.com/Islamic_finance/Student-finance-progress.html
Mohammed AminDDD2A903-4E6A-47DF-BB48-BB0B9283A88BWhy Islamic mortgages normally cost more than conventional mortgagesIn the UK Islamic mortgages are more expensive than conventional mortgages. There are good reasons for this discrepancy. Islamic banks lack the economies of scale achieved by conventional banks. Islamic mortgages also involve more, and more complex, legal transactions. As Islamic finance grows, the difference should narrow.26 Mar 2017 19:55:15 GMThttps://www.mohammedamin.com/Islamic_finance/Why-Islamic-mortgages-cost-more.html
Mohammed AminC2D1907C-3E23-4DCE-A67E-271E11BC17DFThe need for more life takaful (insurance) provisionMost people have too little life insurance. This applies even more strongly in the case of Muslims. Some Muslims have religious concerns about life insurance. However there is an Islamic finance version approved by Shariah scholars, known as life takaful. While life takaful is now widely available in Malaysia and the Gulf Cooperation Council countries, I am not aware of it being available in the UK.20 Feb 2017 16:03:00 GMThttps://www.mohammedamin.com/Islamic_finance/More-life-takaful-needed.html
Mohammed AminE9D8C06D-CE98-45B2-9B5D-6C808A3C46A0The time value of money in Islamic financePeople prefer money now to money later. This is known as the time value of money. Some early writers on Islamic finance appeared to believe that it required there be no time value of money. More recent academic writers generally recognise the time value of money, but then struggle to distinguish its application in Islamic finance from that in conventional finance.18 Feb 2017 15:52:50 GMThttps://www.mohammedamin.com/Islamic_finance/Time-value-of-money-in-Islamic-finance.html
Mohammed AminF78C27A8-FFBB-44AE-ACEE-20746209666EA simple introduction to murabaha (purchase and resale) transactionsI have added "murabaha" to my "Glossary of Islamic finance terms." A murabaha transaction enables a bank to finance the purchase of an asset by a customer without making an interest bearing loan. This page explains how it works.20 Jan 2017 21:15:20 GMThttps://www.mohammedamin.com/Islamic_finance/Murabaha-simple-introduction.html
Mohammed Amin59373A2D-8C93-4175-92C7-35666B81D9CCIntroducing external Shariah audit requires abolishing the Shariah Supervisory BoardIslamic financial institutions are required to comply with Shariah rules. Shariah governance presently rests with the institution's Shariah Supervisory Board (SSB), which is normally appointed by the directors. There are concerns about whether the SSB is sufficiently independent or has sufficient auditing skills to give an opinion on whether the institution has complied with Shariah. Accordingly there are calls for the introduction of external Shariah audit (ESA). However, those calling for ESA have not yet addressed the implications of ESA for the SSB.26 Dec 2016 21:57:41 GMThttps://www.mohammedamin.com/Islamic_finance/External-Shariah-audit-requires-abolishing-SSB.html
Mohammed Amin81F6D4C1-C7B1-49D9-984B-F4D739F27196Do Muslims behave like Homo Islamicus?Does Islamic banking meet different needs from those met by conventional banking? Not in my view. However Islamic economists envisage Islamic finance as part of a completely different economic system. Underlying Islamic economics is "Homo Islamicus" who behaves quite differently from the classical "Homo economicus." In contradiction, I do not see the economic behaviour of real Muslims as being materially different from that of real non-Muslims.22 Oct 2016 20:01:04 GMThttps://www.mohammedamin.com/Islamic_finance/Homo-Economicus-and-Homo-Islamicus.html
Mohammed AminC7A41CCF-937B-4B9D-AF4E-04803AD9024EWhy fixed return contracts predominate in Islamic bankingI received an interesting enquiry from a PhD student in Germany. He expected Islamic banks to primarily use profit participating contracts. He found that, in practice, fixed return contracts overwhelmingly predominate in Islamic banking. I already knew this and explained to him that fixed return contracts are used for commercial reasons. Profit participating contracts are actually very unattractive to Islamic banks, and also to their customers.12 Aug 2016 21:32:47 GMThttps://www.mohammedamin.com/Islamic_finance/Fixed-return-contracts-predominate-in-Islamic-banking.html
Mohammed AminD7D368F5-8E21-4875-92B3-5A3BE6E3F59AThe introduction of standardised Islamic foreign exchange forwardsInternational business almost always gives rise to foreign exchange risk. Derivative contracts assist conventional companies to manage foreign exchange risk, but are not considered Shariah compliant. A Shariah compliant foreign exchange forward contract has now been developed. There is standard documentation which should make the contract easy to use.27 Jul 2016 18:34:56 GMThttps://www.mohammedamin.com/Islamic_finance/Islamic-foreign-exchange-forwards.html
Mohammed AminAchieving Shariah compliant student finance in the UK illustrates how avoiding apathy requires realismMany people today are apathetic. Some people are apathetic because they wrongly believe the world cannot be changed. Others wrongly believe the world can be changed easily and quickly, and give up when success is not immediate. Both wrong perceptions lead to apathy. The antidote to apathy is belief in the possibility of change combined with realism about how long it will take and how hard it will be. My experience in dealing with the UK Government on Shariah compliant student finance illustrates this quite well. I started meeting the government in 2011, and others had been involved even before that. The Prime Minister promised in October 2013 that change would happen, but I do not expect it before September 2017 at the earliest.16 Jun 2016 18:34:56 GMThttps://www.mohammedamin.com/Success-tips/Avoiding-apathy-requires-realism.html
Mohammed AminHow should VAT systems treat Islamic finance transactions?My article originally published in the magazine "Tax Notes International" points out that VAT systems developed in an environment of conventional finance. Particularly where one of the parties is not in business, or is carrying on an exempt or partially exempt business, Islamic finance risks incurring higher VAT costs than conventional finance. The approaches taken by four countries, South Africa, Singapore, Malaysia and the UK have some aspects in common, while other parts of their approaches differ. The article also makes some general policy recommendations.6 Jun 2016 18:34:56 GMThttps://www.mohammedamin.com/Islamic_finance/TNI-VAT-systems-Islamic-finance-transactions.html
Mohammed Amin33CF6481-5486-40F0-BDC4-C674FADA132CAre UK universities mis-selling Islamic finance masters' degrees?The two main reasons for studying a subject at university are its intrinsic interest and its value for a career. The relative weights given to these two criteria vary from person to person. Growing numbers of UK universities are offering masters' degrees in Islamic finance. However, if UK students are taking them for career enhancement, mis-selling may be taking place.17 May 2016 16:15:05 GMThttps://www.mohammedamin.com/Islamic_finance/UK-universities-misselling-masters-degrees.html
Mohammed Amin1D731E20-84F8-4AF8-B715-93A7D63368A9The need for Shariah compliant annuitiesA growing number of people are in defined contribution pension schemes. Many Muslims in such schemes want Shariah compliant pension arrangements. There is adequate Shariah compliant provision for the investment phase of pension schemes, but not for the retirement phase. In particular Shariah compliant annuities are needed to satisfy retirees' financial requirements. Developing a market for Shariah compliant annuities will also help sukuk issuers to access longer term funds than they can at present.18 Apr 2016 10:42:34 GMThttps://www.mohammedamin.com/Islamic_finance/Need-for-Shariah-compliant-annuities.html
Mohammed AminAADAA029-56E8-4B0A-8A0B-72F1300AC8C0Bank of England consultation on establishing Shariah compliant central bank liquidity facilitiesConventional banks can hold liquidity deposits with the Bank of England. The Bank of England also lends money to conventional banks when required. However Islamic banks are not able to use these facilities as they are not considered Shariah compliant which makes their treasury management much more difficult. The Bank of England is currently consulting on how it might offer Shariah compliant central bank facilities. I have responded to the consultation, which closes on 29 April 2016.11 Mar 2016 16:01:10 GMThttps://www.mohammedamin.com/Islamic_finance/BoE-Shariah-compliant-central-bank-liquidity-facilities-consultation.html
Mohammed AminFA99231C-19DF-4596-BB49-169D7952E472Glossary of Islamic finance termsThere are many Islamic finance glossaries available on the internet. I have create another due to some specific objectives about spelling and to give more detailed explanations than the typical glossary. The glossary will grow slowly as I add words to it. If there is a word you would like me to include, please let me know.14 Feb 2016 11:54:14 GMThttps://www.mohammedamin.com/Islamic_finance/Islamic-finance-glossary.html
Mohammed Amin6BC20127-B4D5-48B9-9AD5-7E437BE99B23Don't confuse religious questions and empirical questionsReligious and empirical questions are answered by different methods. Accordingly confusing them is a serious mistake. Whether God says that money should only be gold or silver is a religious question. Whether the economy would function better by replacing fiat money with gold or silver is an empirical question. The empirical answer is clear. All advanced economies use fiat money because they run better than they did with gold as money.13 Feb 2016 19:55:34 GMThttps://www.mohammedamin.com/Islamic_finance/Confusing-religious-and-empirical-questions.html
Mohammed Amin740AFA67-6B00-4B92-ADA0-E91E620ECA5DWorking in a large firm as an Islamic finance tax advisorMy article for "IFN Education." Islamic finance tax advisors need to be tax experts, but they also need to know about relevant other areas such as Shariah, accounting, company law and treasury management. In addition, good client service also requires strong soft skills such as listening and communicating clearly.22 Jan 2016 11:10:08 GMThttps://www.mohammedamin.com/Islamic_finance/Large-firm-Islamic-finance-tax-advisor.html
Mohammed AminF1B7E9BF-D421-4438-A722-533BE02E1E7EShould Muslims be actuaries? How misunderstandings about Islam spread.I regularly receive requests for advice, especially about careers. This recent enquiry was from a schoolboy who was under the impression that Islam prohibited Muslims from being actuaries. In response I gave him examples of actuarial practice within Islamic finance. More generally, I stressed the essential requirement to take one's own decisions on religious matters.17 Jan 2016 22:11:25 GMThttps://www.mohammedamin.com/Community_issues/Should-Muslims-be-actuaries.html
Mohammed Amin5083D3C3-E840-4495-B47C-E8567331BE23Taxation Issues in Islamic Wealth ManagementWealth management is important to individuals and to the financial services industry. For all transactions the tax implications must be considered. However, tax is always country specific. Accordingly this article explains some of the generic tax issues that need consideration, and then goes on to outline how UK law deals with the transactions discussed as a guide to those who need to research similar transactions in other countries.10 Jan 2016 21:49:07 GMThttps://www.mohammedamin.com/Islamic_finance/Taxation-issues-Islamic-wealth-management.html
Mohammed Amin9F9588FA-3FE3-4F7B-8B53-C81482B68E7BVAT and Islamic finance transactionsIslamic finance presents challenges for VAT systems because it requires more transactions than the conventional finance assumed by most tax systems. Consequently it can cause extra VAT costs to arise. Malaysia and South Africa have introduced specific VAT rules for Islamic finance while the UK relies upon general VAT law, which can lead to difficulties in certain situations.19 Dec 2015 22:10:01 GMThttps://www.mohammedamin.com/Islamic_finance/VAT-and-Islamic-finance-transactions.html
Mohammed Amin0666726C-38B1-49CB-ACAA-63373A3B8C58The language of international Islamic finance is EnglishInternational Islamic finance is normally conducted in English. However precision and brevity often require the use of vocabulary derived from Arabic. Such imported words become part of the English language and are no longer foreign words. Accordingly they should not have transliteration signs or use Arabic grammatical formulations.17 Oct 2015 21:58:05 GMThttps://www.mohammedamin.com/Islamic_finance/English-international-Islamic-finance-language.html
Mohammed AminD22DEB56-51CF-4246-885B-2ACADE1895C0Becoming an Islamic finance columnistAlthough I have been writing technical articles for 18 years, I have just become a columnist for the first time with a monthly column in the magazine "Islamic Finance News." I devoted my first column to explaining how I got involved with Islamic finance, and why I am passionate about it.19 Sep 2015 22:05:42 GMThttps://www.mohammedamin.com/Islamic_finance/Becoming-an-Islamic-finance-columnist.html
Mohammed Amin94C4A406-4843-44BB-8D55-48DDA38D6573What the UK Islamic banks' 2014 accounts tell usIn 2014 all but one of the UK's Islamic banks made a profit. However return on equity is still unacceptably low for all of them. Their accounts show very different strategies and it is wrong to talk of the UK's Islamic banks as if they were a homogeneous category.15 Jul 2015 23:59:32 GMThttps://www.mohammedamin.com/Islamic_finance/What-UK-Islamic-banks-2014-accounts-tell-us.html
Mohammed Amin3F8EB3DB-DF06-4DC3-966A-5094D38F6695Radio interview: 15 Minute Introduction to Islamic FinanceMy interview on Radio Algeria International which gives a simple introduction to Islamic finance requiring no previous knowledge. The interviewer's questions are also written out on the page.9 Apr 2015 22:31:56 GMThttps://www.mohammedamin.com/Islamic_finance/15-Minute-Introduction-to-Islamic-Finance.html
Mohammed Amin9AC454D6-C70A-498C-BC39-AE6B1013EC74Cross-Border Taxation of Islamic Finance in the MENA RegionAn article written for the Journal of International Taxation. It was based on the report "Cross border taxation of Islamic finance in the MENA region Phase One" which I wrote as part of a research project supported by the Qatar Financial Centre Authority. The intended audience was MNC tax directors not knowledgeable about Islamic finance. My website page has the full text submitted to the magazine, which was abridged somewhat for publication due to space constraints.20 Mar 2015 20:15:02 GMThttps://www.mohammedamin.com/Islamic_finance/Cross-border-IF-taxation-MENA-JIT.html
Mohammed AminBAD51A1E-7188-45F3-8A9E-63A9E2E23961Islamic Finance 2014 Accounting and Tax DevelopmentsEach year the magazine Islamic Finance News publishes an annual guide. While the magazine is only available to subscribers, the 2015 Annual Guide can be downloaded free by everyone.
Page 6 of the 2015 Annual Guide contains an article by me which can be summarised as follows:
During 2014 the International Accounting Standards Board (IASB) finally started to give some serious attention to Islamic finance accounting. It is also a good development that the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is now providing input to the IASB on accounting. While accounting is global, tax developments are always country specific. The trend continues of countries continuing to modify their tax rules to facilitate Islamic finance.
You can read the article at the link below.13 Mar 2015 22:14:31 GMThttps://www.mohammedamin.com/Islamic_finance/Accounting-and-Tax-Developments-2014.html
Mohammed AminFF1B0C85-25CE-45B1-B588-EC65DC964D6CThe role of Islamic finance in Britain's international competitivenessGovernment action can increase or reduce the country's international competitiveness. In practice this happens with the cumulative effect of many small decisions. The UK Government's encouragement of Islamic finance illustrates this point very well.15 Nov 2014 21:41:59 GMThttps://www.mohammedamin.com/Politics/International-competitiveness-Islamic-finance.html
Mohammed AminA0DDAAB7-9F0D-4BFD-962B-E89346267053Islamic finance in the UK - a look backwardsOutside Muslim majority countries, the UK has been the leading pioneer of Islamic finance. However, after some major announcements in 2006 and 2007, the UK seemed to lose interest. The UK government has recently taken Islamic finance much more seriously. This culminated in the UK issuing the first sovereign sukuk outside Muslim majority countries.19 Jul 2014 18:08:22 GMThttps://www.mohammedamin.com/Islamic_finance/UK-a-look-backwards-19-7-2014.html
data:text/plain,manual:1405793327311:9285535587539192:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlThe impact of the OECD's tax policy challenges on Islamic financeThe rules for taxing international business developed in an era when communications were slow and difficult. However electronic communication and fast international travel make them outmoded. Consequently Governments are losing tax revenue as businesses sell via the internet from low tax jurisdictions for example. There is a risk that the likely policy responses could impact upon Islamic finance unless great care is taken with tax law drafting.Fri, 02 May 2014 21:15:51 GMThttps://www.mohammedamin.com/Islamic_finance/OECD-tax-policy-challenges.html
data:text/plain,manual:1399065379464:24:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlUK Government consultation on Shariah compliant student financeThe UK has a generous government provided student loan scheme. However some Muslim students do not use it for religious reasons. In October 2014 the Prime Minister committed to providing a Shariah compliant student finance scheme. The Government is now consulting on a proposed design. The consultation closes on 12 June 2014.Fri, 04 Apr 2014 20:39:12 GMThttps://www.mohammedamin.com/Islamic_finance/Shariah-compliant-student-finance-consultation.html
data:text/plain,manual:1396643983448:6096987100715787:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlSukuk - taxation of legal form or economic substance? The role for tax incentives?In this interview on sukuk taxation I explain that no country taxes purely on legal form or purely on economic substance. I also discuss whether there is a role for tax incentives, and point out that in practice the benefits of incentives get shared between issuers and investors.Wed, 02 Apr 2014 20:27:47 GMThttps://www.mohammedamin.com/Islamic_finance/Sukuk-taxation-legal-form-economic-substance-incentives.html
data:text/plain,manual:1396470501849:3010819426242217:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlHow should indirect taxes deal with Islamic finance? - VideoThis 33 minute lecture explains the main indirect taxes: transfer taxes, sales taxes and value added taxes (VAT) from first principles. I then discuss how VAT should apply to financial services generally, before considering why VAT presents particular problems for Islamic finance transactions. I also suggest some possible ways forward.Sat, 15 Mar 2014 21:06:05 GMThttps://www.mohammedamin.com/Islamic_finance/Indirect-taxes-and-Islamic-finance-video.html
data:text/plain,manual:1394917593797:3100:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlTax Treatment of Islamic Finance in the MENA Region - videoThis 27 minute lecture explains the methodology and findings of a major study on the taxation of Islamic finance in the Middle East and North Africa. As well as summarising what we found, I give recommendations for how MENA region countries should modify their direct tax systems to facilitate Islamic finance.Fri, 14 Mar 2014 20:48:45 GMThttps://www.mohammedamin.com/Islamic_finance/Taxation-of-Islamic-finance-in-MENA-video.html
data:text/plain,manual:1394830153984:804066908:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlShould accounting firms undertake Shariah audits?My seven minute speech outlines the roles of the Board of Directors, the internal Shariah Department, the Shariah Supervisory Board and the external auditors. I explain the role I see for the external auditors in auditing Shariah compliance, and who I believe should report to stakeholders.Thu, 13 Mar 2014 10:01:49 GMThttps://www.mohammedamin.com/Islamic_finance/Should-accounting-firms-undertake-Shariah-audits.html
data:text/plain,manual:1394704944058:9567851020399982:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlA late 2013 survey of the UK Islamic finance industryThe clouds of the global financial crisis are lifting. However the UK's Islamic banks are still unprofitable and the best performer had 2012 ROE of only 2%. The announcement of a UK sukuk was the highlight of 2013 for the industry.Mon, 10 Mar 2014 22:47:59 GMThttps://www.mohammedamin.com/Islamic_finance/Survey-UK-Islamic-Finance-industry-2013.html
data:text/plain,manual:1394491712712:572415778456255:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlA tale of two banks - videoThis is a 26 minute video of my lecture for the Institute of Islamic Banking and Insurance, comparing the accounts of Bank of London and the Middle East plc and Islamic Bank of Britain plc. It explains the business of banking, and shows how much can be learned by reading published accounts.Wed, 05 Mar 2014 15:07:25 GMThttps://www.mohammedamin.com/Islamic_finance/A-tale-of-two-banks-video.html
data:text/plain,manual:1394032073989:955225391812665:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlCareer prospects in Islamic finance in the UKMy chapter in a report published by Simply Sharia to coincide with the World Islamic Economic Forum being held in London. I explain that there is only a limited need for Islamic finance specialists in the UK. In practice experience for these careers generally needs to be acquired in the conventional finance industry.Tue, 12 Nov 2013 00:00:09 GMThttps://www.mohammedamin.com/Islamic_finance/UK-Islamic-finance-career-prospects.html
data:text/plain,manual:1384214451211:3214159763516041:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlA UK Government sukuk at last!The UK has been thinking about issuing a sukuk since 2007. However it has kept putting it off as not being value for money. Accordingly David Cameron pleasantly surprised many people when he announced at the World Islamic Economic Forum that he wanted the UK to go ahead with an issue. I wrote an article the same day welcoming the announcement and answering some questions from 2008 about the implications.Fri, 08 Nov 2013 22:11:11 GMThttps://www.mohammedamin.com/Islamic_finance/UK-Government-sukuk-at-last.html
data:text/plain,manual:1383948692831:9971958367545756:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlA simple introduction to sukukPrime Minister David Cameron announced at the London World Islamic Economic Forum that he wanted the UK to issue a sovereign sukuk. This has led many to ask what a sukuk is. I have written a simple explanation.Mon, 04 Nov 2013 20:59:48 GMThttps://www.mohammedamin.com/Islamic_finance/Sukuk-simple-introduction.html
data:text/plain,manual:1383598818411:6725447814983094:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlA late 2012 snapshot of the UK Islamic finance industryMy contribution to the Islamic Finance News global "2013 Guide". In my view UK Islamic finance has struggled since the global financial crisis. The UK Islamic banks were unprofitable in 2011. Figures for 2012 were awaited when I wrote. One key challenge is that the UK retail Islamic finance market is small. If conditions improve, 2013 may see new entrants to the industry.Sat, 20 Apr 2013 20:07:17 GMThttps://www.mohammedamin.com/Islamic_finance/Snapshot-UK-Islamic-finance-industry-2012.html
data:text/plain,manual:1366488462374:4114573385158321:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlReport on the cross-border taxation of Islamic finance in the MENA regionI am the principal author of this report published by the Qatar Financial Centre Authority and the International Tax and Investment Center. It looks at the taxation of four common Islamic finance structures: commodity murabaha, sukuk, salaam and istisna in eight MENA region countries: Egypt, Jordan, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Turkey and also in the Qatar Financial Centre. The report recommends how these countries should adapt their tax systems to facilitate Islamic finance.Sun, 17 Mar 2013 21:27:49 GMThttps://www.mohammedamin.com/Islamic_finance/MENA-cross-border-IF-taxation-report.html
data:text/plain,manual:1363555718661:7575409381056931:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlHow can Islamic finance enter western markets?My response to this generic question is that each country market is distinct, and thinking about western markets as a whole will lead to bad strategic decisions. Each Islamic financial institution needs to decide what markets it can enter profitably and focus on its core strengths.Wed, 05 Dec 2012 23:10:45 GMThttps://www.mohammedamin.com/Islamic_finance/Entry-into-western-markets.html
data:text/plain,manual:1354749066757:2971478674738909:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlSome questions about the International Islamic Liquidity Management Corporation (IILM)The IILM was set up by several central banks from Muslim majority countries. Its aim is to issue high quality Shariah compliant instruments suitable for Islamic banks to hold for their treasury operations. To date, it has not yet issued any such instruments. I pose some questions that must be answered before such instruments are issued.Wed, 21 Nov 2012 20:57:59 GMThttps://www.mohammedamin.com/Islamic_finance/Questions-about-IILM.html
data:text/plain,manual:1353531518415:7742614695410565:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlThe evolution of sukuk from asset-backed to asset-based structuresPeople use terms such as "asset backed" and "asset based" with sukuk without being clear what they mean. After defining the terms, I point out that investors in asset based sukuk have much less protection in the event of default by the sponsor. The credit ratings agencies have been saying the same thing for many years, but few people paid attention until the financial crisis hit some of the Gulf states.Sat, 10 Nov 2012 21:21:46 GMThttps://www.mohammedamin.com/Islamic_finance/Sukuk-evolution-asset-backed-to-asset-based.html
data:text/plain,manual:1352582532173:17840852420746112:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlIslamic Financial Institutions and the Implications of Accounting under IFRSIslamic finance practitioners often question whether IFRS or AAOIFI accounting standards should be used. In practice, local law rarely allows a choice. While IFRS accounting often deviates from the transaction's legal form, so does AAOIFI accounting at times. IFRS accounting can make it harder to assess whether the company's transactions are Shariah compliant.Fri, 14 Sep 2012 17:46:48 GMThttps://www.mohammedamin.com/Islamic_finance/IFRS-accounting-and-Islamic-Financial-Institutions.html
data:text/plain,manual:1347644838484:5908390550491628:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlThe impact on Islamic banking of Indonesia's new rules on bank ownershipMany countries have restrictions on foreigners owning banks. These are normally a bad idea. Indonesia's new rules are quite flexible, and therefore should not do any serious harm.Wed, 15 Aug 2012 01:40:36 GMThttps://www.mohammedamin.com/Islamic_finance/Indonesian-bank-ownership-rules.html
data:text/plain,manual:1344994864490:48954006308552030:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlA tale of two banks: a comparison of the published accounts of Islamic Bank of Britain and of Bank of London and the Middle EastI gave a lecture based upon comparing the accounts of this Islamic retail bank and this Islamic investment bank. The accounts show the differing commercial pressures these banks face.Sun, 12 Aug 2012 01:06:46 GMThttps://www.mohammedamin.com/Islamic_finance/A-tale-of-two-banks.html
data:text/plain,manual:1344733637206:9425354631200892:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlWhat businesses should Islamic banks finance?The magazine Islamic Finance News asked: "Should the Islamic finance industry be responsible for funding the global Halal sector? And if so, how should this be facilitated?" This question appears to assume that Islamic banks exist to fulfil a social purpose. In my view, they do not; their sole purpose is to make a profit for their shareholders.The magazine Islamic Finance News asked: "Should the Islamic finance industry be responsible for funding the global Halal sector? And if so, how should this be facilitated?" This question appears to assume that Islamic banks exist to fulfil a social purpose. In my view, they do not; their sole purpose is to make a profit for their shareholders.Fri, 03 Aug 2012 00:57:53 GMTfile:///C
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data:text/plain,manual:1343955499995:1256917874370178:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlDoes Islamic finance need you?Many young UK Muslims obtain Islamic finance qualifications and want a career in Islamic finance. However the supply of UK Islamic finance jobs is very limited. Moreover, the Islamic finance industry needs specialist skills, which in most cases can only be acquired within conventional finance.Wed, 25 Jul 2012 00:04:15 GMTfile:///C
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data:text/plain,manual:1343174686345:17463556418287518:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlNon-Malaysian companies issuing ringgit sukukLike many developing countries, Malaysia has exchange controls. Whether foreign companies should be allowed to issue ringgit denominated sukuk in Malaysia is purely a foreign exchange management question, not an Islamic finance question.Wed, 18 Jul 2012 21:44:33 GMTfile:///C
/Data/Vital/Local_sites/MohammedAmin/Islamic_finance/Non-Malaysian-companies-issuing-ringgit-sukuk.html
data:text/plain,manual:1342647903478:5623120662339767:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlIslamic banks' treasury management challengesIslamic banks face far more challenges than conventional banks. In particular, the main contracts used by Islamic banks for treasury liquidity management are sometimes frowned upon by Shariah scholars. Also there is a shortage of liquidity management instruments apart from the Shariah compliant inter-bank market.Thu, 05 Jul 2012 21:32:56 GMTfile:///C
/Data/Vital/Local_sites/MohammedAmin/Islamic_finance/Islamic-banks-treasury-management-challenges.html
data:text/plain,manual:1341524005564:7:https://www.mohammedamin.com/RSS/MA-Islamic-finance.xmlHow industry standardisation in Islamic finance could help promote cross-border transactionsIslamic finance is far less standardised than conventional finance, with little standard documentation. This increases transaction costs. The industry also needs more Shariah standards and would benefit from greater willingness to publish fatwas.19 Jun 2012 20:26:17 GMTfile:///C
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